Philips and United Technologies

In 2008, Philips, a Dutch diversified technology multinational, and United Technologies Corporation (UTC), a U.S. manufacturing conglomerate, produced their first integrated reports. Since then, Philips has developed this practice to a much greater extent than UTC by, among other things, maintaining a sophisticated corporate reporting website. Although the term "integrated report" was only used once in its relatively bulky 276-page annual report, Philips was clear that producing an integrated report was its intention. It explained how this had evolved from previous nonfinancial reporting practices:

In 1999 we published our first environmental annual report. We expanded our reporting in 2003 with the launch of our first sustainability annual report, which provided details on our social and economic performance in addition to our environmental results.

Now, for the first time, Philips is reporting on its annual financial, social and environmental performance in a single, integrated report. This approach reflects the progress we have made to embed sustainability in our way of doing business.31

Philips' evolution is fairly typical: companies begin with an environmental report, expand it to a broader sustainability (sometimes called a corporate social responsibility) report, and then make the leap to an integrated report. In fact, it follows general trends in "sustainability." Pressured heavily by climate change, companies tend to focus first on environmental issues, only later defining sustainability in broader "ESG" terms. When a company reaches the point of accepting that sustainability is no longer just a "program" but is core to strategy and operations, it has formulated the common argument for why integrated reporting makes sense.32

This is a necessary but not sufficient condition. While many companies today say they "really mean it" when it comes to sustainability, very few are publishing an integrated report. For us, this raises the question of how to separate sincerity from greenwashing. While we acknowledge that an integrated report can itself be used as a form of greenwashing, there are easier ways to do so if that is the company's intent. One discipline to prevent the practice and perception of greenwashing is to clarify which issues and audiences matter to the company and which do not. The basis of this distinction lies in what the company identifies as "material," something we explore in depth in Chapters 5 and 6.

Albeit in a more modest way than the companies discussed above, an American company can be considered a pioneer in integrated reporting as well: UTC.33 Though UTC did not use the word "integrated" in a reporting context a single time in its svelte 98-page 2008 annual report,34 it stated in a February 25, 2009, press release announcing the report that "United Technologies Corp. (NYSE: UTX) has become the first among the 30 members of the Dow Jones Industrial Average to publish a fully integrated annual and corporate responsibility report."35 Echoing the argument of other companies that such integration makes business sense, albeit in the language of "corporate responsibility" rather than "corporate social responsibility" or "sustainability," the press release goes on to quote Andrea Doane, director of corporate citizenship and community investment: "UTC's 2008 Annual Report reflects the belief that corporate responsibility and profitability go hand in hand." Doane continued, "For UTC, the evolution to one report is natural, but we believe firmly in the years to come the practice of just one report will be not only widespread, but expected from those who believe corporate responsibility and profitability are inseparable."36 As discussed in the next chapter, UTC's expectation that this practice would become "widespread" has not yet been met as of 2014.

In their "Dear Shareowner" letter, UTC Chairman George David and President and Chief Executive Officer Louis Chenevert stated, "For the first time, this Annual Report combines business and financial results with those on corporate responsibility." The report's subtitle, "More with less," speaks to UTC's efforts to be more efficient in its natural resource use. It is also suggestive of the consolidation of two reports into one, raising the more general question of whether an integrated report means "one report" or whether that additional information should be presented through other means. In 2010, Eccles and

Krzus made an argument that an integrated report does not strictly mean "one report"â€”an issue we will address in greater depth throughout this book.37